Income Tax Severed Letters - 2008-07-25

Ruling

2008 Ruling 2006-0217541R3 - Stock Option Reimbursement

Unedited CRA Tags
9, 90, 15(1), 56(2), 12(1)(x), 245; 5907(2)(j)
Summary Under
Tax Topics - Income Tax Act - Section 12 - Subsection 12(1) - Paragraph 12(1)(x)
recharge agreement

Principal Issues: If Parentco and Subco enter into a Recharge Agreement under which Subco pays to Parentco an amount equal to the stock option benefit enjoyed by Subco's employees on the exercise of options to acquire shares of Parentco, would the payment be included in the income of Parentco under sections 9 or 90, subsections 15(1) or 56(2), or paragraph 12(1)(x)?

Position: No, in cases where the payment is in respect of services rendered by the employees to Subco, for options granted after the date of the Recharge Agreement, or for the increase in the stock option benefit that arises after the date of the Recharge Agreement on pre-existing options.

Reasons: It would not be unreasonable for Subco to reimburse Parentco for that portion of the employment benefit that has effectively been borne by Parentco on Subco's behalf.

2008 Ruling 2008-0280131R3 - Interest exempt from tax

Unedited CRA Tags
212(1) 212(4) Art. XI Austria Treaty

Principal Issues: Whether interest and guarantee fees are exempt from Part XIII tax in Canada in this specific situation by virtue of the Canada-Austria Income Tax Convention (the "Treaty")?

Position: Yes.

Reasons: Interpretation of the Income Tax Act and the Treaty.

Technical Interpretation - External

18 July 2008 External T.I. 2008-0271211E5 F - Fiducie de santé et de bien-être

Unedited CRA Tags
110(8) 248(1)
Summary Under
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Private Health Services Plan
PHSP can include a self-insured plan

Principales Questions: Est-ce qu'un régime privé d'assurance-maladie géré par une fiducie de santé et de bien-être, dont les prestations sont autoassurées, peut être considéré comme un tel régime?

Position Adoptée: Oui.

Raisons: Les fiduciaires désirent autoassurer les prestations du RPAM qui sont présentement fournies en vertu d'un contrat d'assurance collective. Le projet comporte différentes caractéristiques. L'ARC a fourni des commentaires généraux puisqu'elle n'a pas pour pratique d'émettre des commentaires concernant une transaction projetée autrement que sous la forme de décision anticipée. Nous n'avions ni les contrats, ni la convention de fiducie et nous ne nous sommes pas prononcés définitivement sur la question.

15 July 2008 External T.I. 2008-0275471E5 F - Société de personnes/Ajustement au PBR

Unedited CRA Tags
53(1)e) 99(1) 40(1)a)(i)
Summary Under
Tax Topics - Income Tax Act - Section 99 - Subsection 99(1)
CRA was prepared to rule to avoid double taxation problem prior to the s. 99(1) amendment
Summary Under
Tax Topics - Income Tax Act - Section 53 - Subsection 53(1) - Paragraph 53(1)(e) - Subparagraph 53(1)(e)(i)
CRA intent to avoid double taxation from untimely basis adjustment for earned income

Principales Questions: D'ici la sanction du projet de loi modifiant le paragraphe 99(1), est-ce que l'ARC entend appliquer la loi de manière à ce que les revenus ou les pertes d'une société de personnes pour sa dernière année d'imposition avant sa dissolution soient pris en considération dans le calcul du PBR prévu à l'article 53?

Position Adoptée: Oui. Dans les situations où une société de personnes cesse d'exister et qu'il y a une possibilité de double imposition, l'ARC est prête à considérer, dans le cadre d'une demande de décision anticipée en matière d'impôt, à appliquer la loi d'une manière telle que le contribuable ne soit pas assujetti à double imposition.

Raisons: Même opinion que celle énoncée dans la Nouvelle Technique no 9

15 July 2008 External T.I. 2008-0278971E5 F - Feuillet T1204

Summary Under
Tax Topics - Income Tax Regulations - Regulation 237 - Subsection 237(2)
no T2014 slips required where the recipients did not have a contract with the federal government

Principales Questions: Est-ce que les remboursements pour des frais de voyage faits à des membres d'un comité aviseur pour le compte du gouvernement fédéral, doivent faire l'objet d'une déclaration sur un feuillet T1204?

Position Adoptée: Non.

Raisons: Le feuillet T1204 vise les paiements contractuels de services du gouvernement. Le comité aviseur n'a pas de relation contractuelle avec le gouvernement.

15 July 2008 External T.I. 2008-0279271E5 F - Frais de déménagement en cas de faillite

Unedited CRA Tags
62 128(2)
Summary Under
Tax Topics - Income Tax Act - Section 128 - Subsection 128(2)
as s. 128 is a complete code not covering moving expenses, an individual could deduct moving expenses incurred in the stub pre-bankruptcy year from bankruptcy year income

Principales Questions: Est-ce que les frais de déménagement encourus par un particulier dans l'année précédant immédiatement l'année de la faillite peuvent être déduits dans l'année de la faillite?

Position Adoptée: Oui.

Raisons: Le paragraphe 128(2) restreint l'utilisation de certains crédits lors du calcul de l'impôt payable. Ce paragraphe est un code complet et ne modifie pas la règle voulant que les frais de déménagement peuvent être déduits dans une année d'imposition subséquente au déménagement dans la mesure où ils ne sont pas déductibles dans l'année d'imposition précédente.

11 July 2008 External T.I. 2008-0271941E5 F - Frais de déplacement-principal lieu d'affaires

Unedited CRA Tags
18(1)a) 18(1)h)
Summary Under
Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(h)
use of their homes for voyage planning did not render pilots’ homes their principal place of business
Words and Phrases
principal place of business

Principales Questions: Est-ce que des frais de déplacement encourus par un pilote de navires entre son domicile et un port d'embarquement sont déductibles dans le calcul de son revenu tiré d'une entreprise?

Position Adoptée: À la lumière des faits qui nous ont été communiqués, non.

Raisons: L'Agence du revenu du Canada est d'avis que l'alinéa 18(1)h) interdit la déduction des frais de véhicule à moteur engagés par un contribuable pour les déplacements entre son domicile et son lieu d'affaires à moins qu'il puisse être démontré que le domicile du contribuable représente son principal lieu d'affaires.

11 July 2008 External T.I. 2008-0267791E5 - normal growth guidelines -exchangeable units

Unedited CRA Tags
122.1(1)
Summary Under
Tax Topics - Income Tax Act - Section 122.1 - Subsection 122.1(2)

Principal Issues: 1. Are equity substitutes (i.e., exchangeable securities of an underlying entity of a SIFT entity that are exchangeable for an interest in the SIFT entity) considered growth in the year that they are issued by the underlying entity or in the year that they are converted to units of the SIFT entity?
2. Are exchangeable securities of an underlying entity of a SIFT entity that are issued in 2007 but not converted to units of the SIFT entity before the end of 2008 also considered to be growth for 2008?

Position: 1. Equity substitutes, such as exchangeable units of an underlying entity, are considered growth in the year in which they are issued and not in the year that they are exchanged for units of the SIFT entity. 2. No.

7 July 2008 External T.I. 2007-0255821E5 - normal growth guidelines - non-arm's length debt

Unedited CRA Tags
122.1

Principal Issues: In order for new equity issued in replacement of debt that was existing on October 31, 2006 to not count as new growth (as set out in the normal growth guidelines issued by the Department of Finance on December 15, 2006), does the debt need to be owed to an arm's length party?

Position: New equity that is issued in replacement of debt of an income trust that was outstanding on October 31, 2006, whether that debt was owed to arm's length party or a non-arm's length party, will not count as new growth of the income trust.

Reasons: Whether the creditor is dealing at arm's length or not with the debtor, the fundamental nature of the debt as being debt does not change. With a non-arm's length debtor, there may be concerns about the rate of interest or other terms of the debt, and the onus for establishing those terms and conditions in a non-arm's length situation will rest with the taxpayer (i.e., there are provisions in the Act which impose certain tax consequences when the terms and conditions are not the same as those that would be imposed between arm's length parties).

27 June 2008 External T.I. 2007-0247551E5 - FAPI and Part XIII Tax

Unedited CRA Tags
91 92(1) 95(1) 5907(12)(a)(ii)
Summary Under
Tax Topics - Income Tax Act - Section 96
DRUPA partnership
Summary Under
Tax Topics - Income Tax Regulations - Regulation 5900 - Subsection 5900(3)
partnership between 2 CFAs was a Cdn-resident person for s. 91(5) purposes
Summary Under
Tax Topics - Income Tax Act - Section 95 - Subsection 95(1) - Foreign Accrual Property Income - A - Paragraph (b)
FA dividends received by NR partnership between 2 CFAs (FP) not excluded from FAPI, but deduction under s. 91(5)/ Reg. 5900(3) to FP
Summary Under
Tax Topics - Income Tax Act - Section 92 - Subsection 92(1) - Paragraph 92(1)(a)
double ACB recognition of FAPI at partnership level and at level of Canco shareholder of CFA partners
Summary Under
Tax Topics - Income Tax Act - Section 91 - Subsection 91(5)
s. 91(5) deduction eliminated net FAPI inclusion to CFA members of foreign partnership receiving foreign dividends from partnership subsidiary

Principal Issues: Various issues regarding foreign affiliate status, FAPI recognition, cost base adjustment of partnership interest and withholding tax on interest.

Position: See letter for details.

Reasons: See letter for details.

Conference

11 June 2008 Roundtable, 2008-0270421C6 - testamentary trust - joint last-to-die policy

Unedited CRA Tags
108(1)

Principal Issues: Is a trust that is settled with the proceeds of a joint last-to-die life insurance policy a testamentary trust?

Position: Yes.

Reasons: Consistent with previous positions
CRA Questions
CALU 2008 Annual Meeting